Toyota’s culture creates blind spots, safety panel reports
Toyota Motor Corp. responded slowly and ineffectually to a growing sudden-acceleration crisis because it was hampered by a top-down management style that gave short shrift to customer complaints, a special panel has concluded.
In a 60-page report, Toyota’s seven-member North American Quality Advisory Panel said the company had come to regard federal safety regulators as adversaries, an attitude that may have exacerbated its response to complaints of sudden acceleration and ultimately led to recalls of more than 10 million vehicles worldwide, as well as nearly $50 million in fines against the automaker.
The panel noted that Toyota’s problems may have stemmed from its drive to become the world’s largest automaker.
“Being ahead of the competition can sometimes be the most dangerous place for any corporation to be,” reported the panel, led by former Transportation Secretary Rodney Slater. “That is because a well-deserved sense of pride at being No. 1 can slowly and subtly transform into arrogance and foster complacency.”
The panel, formed at the peak of the automaker’s recall crisis a year ago, concluded that Toyota could address these problems by altering its rigidly Japan-centered organizational structure to give regional managers more autonomy.
“We thank this distinguished group for their recommendations,” company President Akio Toyoda said in a statement after the report’s release Monday. “The panel has given us further insights into how we can best achieve our vision of exceeding customer expectations with the safest and most responsible vehicles.”
The panel recommended that Toyota put one executive in charge of North American operations, as opposed to having separate heads in charge of “silos” including manufacturing, sales and regulatory divisions.
The automaker should also work harder to listen to and analyze complaints from customers and to work more harmoniously with regulators, the panel said. Separately, it said, Toyota should install electronic data recorders in its vehicles that are easier to read because the current technology is difficult for outside safety officials to use.
“The report makes a pretty good case that Toyota let quality lapse,” said Jeremy Anwyl, chief executive of automotive site Edmunds.com. “Also, it confirms our view that Toyota’s culture — one that works well in times of stability — left it uniquely vulnerable to a fast-moving crisis.”
The report did not address the causes of sudden acceleration, which Toyota has blamed on incorrectly placed floor mats and sticky accelerator pedals. It simply took note of a recent study conducted by NASA, which said that no electronic or software error had been found that could cause sudden acceleration, despite widespread speculation that such a glitch could have caused a rash of reports.
Toyota has held up the NASA report, which was released in February, as an indication that it was not to blame for the rash of sudden-acceleration complaints, first brought to national attention after a 2009 crash near San Diego killed four people.
Regardless of the cause, the sudden-acceleration issue may have grown into a huge black eye for Toyota because structural problems within the company made Toyota “particularly vulnerable” to such a crisis, according to panel member Norman Augustine, former chief executive and chairman of Lockheed Martin Corp.
The report identified a number of areas of deficiency within Toyota requiring improvement, including:
• A top-down management structure that limits local input about potential problems.
• Resistance to outside feedback related to the design and safety of its products.
• A failure to understand that safety problems are distinct from quality problems.
As an example, the panel pointed to a 2007 federal investigation of consumer complaints about sudden acceleration in the Lexus ES 350, noting that it was the National Highway Traffic Safety Administration, rather than Toyota, that took the time to identify the nature of the complaints.
Toyota, by contrast, “noted its success in saving over $100 million by negotiating a limited recall of all-weather floor mats,” an example of what the independent panel called the automaker’s view of regulation as an “adversarial process” that considers blocked regulations to be “wins.”
A spokeswoman for the U.S. Department of Transportation said the agency would not be commenting on the panel’s report.
To deal with the issues it raised, the panel recommended reforms for Toyota to consider implementing. At their heart, the recommendations focused on reforming the automaker’s famed corporate philosophy, called “the Toyota Way,” which dictates a policy of continuous improvement.
Although acknowledging the importance of that principle in making Toyota the world’s largest automaker, the panel indicated that the Toyota Way falls short because it cannot recognize that errors can occur even when design and manufacturing processes function as planned.
A manifestation of this problem, the report found, was that the company “subsumes safety into quality” and has difficulty differentiating between the two. As an example, the panel noted that even its own name — North American Quality Advisory Panel — was inaccurate, because its primary mission was to examine safety rather than quality.
“Safety and quality are very different attributes, and a process that produces quality vehicles will not necessarily produce safe vehicles,” said Brian O’Neill, former president of the Insurance Institute for Highway Safety and a member of the panel.
Another priority would be to unify the structure of the automaker’s operations in North America, the panel suggested. Currently, Toyota has separate sales, engineering, manufacturing and regulatory divisions operating in the U.S. and Canada, all of which function independently and communicate directly with Japan.
The report acknowledged numerous steps taken by Toyota to improve its corporate culture, including appointing a chief safety officer last month and making major reforms at the board level.
The panel will meet for at least another year, at which point the automaker will decide whether to extend its mandate or to appoint new panel members.
Toyota pays panel members for their work, but Slater declined to reveal the financial terms of those contracts, citing a confidentiality agreement. He defended the panel’s independence, however, saying it was allowed to operate — and conduct numerous interviews with company officials as well as outside experts — without interference.
